The announcement by the Federal Open Market Committee is expected at 2:15 p.m. Wednesday.

Financial markets, economists and journalists are all primed for a 50-basis-point cut in the Federal funds target rate to 5.5 percent after Federal Reserve Chairman Alan Greenspan warned Thursday that economic growth is "probably very close to zero." See full story.

Expectations are already growing for further rate cuts. The consensus of economists polled by CBS.MarketWatch.com puts the Fed fund rate near 5 percent at mid-year. Fed funds futures markets are predicting a Fed funds rate below 5 percent in July.

The Fed uses its control over overnight interest rates to influence the level and terms of borrowing in the economy. Banks typically follow the Fed funds religiously when setting their prime-lending rate. Other rates are also likely to fall in step with the Fed funds rate. The Fed funds rate is the rate banks charge each other for overnight loans to maintain the Fed's required reserve requirements. Read how monetary policy works.

The surprising drop in consumer confidence in January reported Tuesday by the Conference Board "locks in a 50" basis point cut, said Peter Kretzmer, economist at Banc of America Securities. See full story.

"It's a done deal," said David Wyss, chief economist for Standard & Poor's.

"When Alan Greenspan says growth is near zero, it means the Fed believes they need to do more," said Bruce Steinberg, chief economist at Merrill Lynch.

"Greenspan's negative spin on the economy strongly suggests that the Fed will continue its aggressive easing with a 50-basis point rate cut on Jan. 31," said Stephen Slifer, chief economist at Lehman Brothers.

An aggressive half-point cut would follow the sudden half-point point cut on Jan. 3, which was one of those rare times the Fed changes policy outside of a regular meeting. It would be the first time since 1984 that the Fed has lowered rates by a full percentage point in one month.

It would be an unusual move, but these are unusual times. Many of the economic numbers are falling to levels not seen since the last recession. Of course, just because some of the data are at recession-levels doesn't mean the economy is actually contracting, but it does underlying the seriousness of the task the Fed faces.

Clearly, with inflationary pressures (outside of soaring energy prices) abated, no one wants a recession.

"A recession isn't in the bag," Kretzmer said. He noted that financial markets reacted quickly and positively to the Fed's Jan. 3 rate cut and could be expected to do the same after Wednesday's announcement. The stock market has stabilized (and the Nasdaq is even up) since the rate cut and the interest-rate spreads between corporate bonds and Treasurys have narrowed, indicating that any incipient credit squeeze has eased.

The economy has plenty of strength yet. Despite all those big headlines about layoffs in the heavy manufacturing and dot-com sectors, the jobless rate is still near 30-years at 4 percent. With jobs still plentiful, incomes have been rising.

The most recent data indicate that chain-store sales are up from December's levels, while home construction and sales are strong and could go higher if mortgage rates fall further.

So there's a bit of a disconnect. Consumers are mostly happy with their lot right now, but are growing increasingly worried about the future.

They know about big layoffs, they've felt the stock market's retreat, they gasped when they got their heating bill and now they are listening to people like President Bush and Chairman Greenspan talking about recession. Their nervousness is only natural.

Consumers, of course, hold their own fate and everyone else's in their hands. If they keep spending, all the economy's problems will fade away.

Kretzmer said he's looking carefully at capital investment and consumer spending. Capital spending slowed from more than 20 percent growth a year ago to less than 5 percent in the third quarter.

Fourth-quarter numbers will be released Wednesday morning as part of the first look at the quarterly gross domestic product. All over Wall Street, corporations have been paring back their spending plans amid lower profit estimates.

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